Wallets are very essential to keep your cryptocurrencies safe and secure. In the case of cryptocurrencies, a wallet is a digital file which contains an address where you can receive your cryptocurrency coins and have the private key to spend them is called a cryptocurrency wallet.
A wallet stores your cryptocurrencies and allows you to spend them as you wish. They are the primary user interface through which you interact with the cryptocurrency world. Your cryptocurrency address is equivalent to your mail address and your private key is your password.
How are HD wallets different from other wallets?
There are many types of wallets present but the most advanced and easy wallets are HD wallets.
In most wallets, a random address is generated every time you do a transaction and every time, you have to back up your data. As the number of your tractions will increase, this simple task becomes complicated and you need a lot of backups. On the other hand, if the same address is reused, it can compromise with your financial privacy.
So, to remove the deficiencies of both these wallets, HD wallets were developed under the BIP 32.
What makes HD Wallets unique?
HD stands for Hierarchical Deterministic. 12-word master seed keys are used in this wallet which derives new addresses for the wallet sequentially and hierarchically every time a transaction is done.
These are sequential so the user does not require to back it up and the financial secrecy is maintained as every address is new.
How does HD wallets work?
Based upon the BIP 2, a tree-like hierarchical structure is generated from the seed master key in the HD wallet. When the user restores the wallet, all the private keys generated by the seed key are recovered using the BIP 32 structure.
The backing up of the seed file is mandatory in the HD wallets so that all the addresses can be retrieved.
Some Popular HD wallets
Some popular HD wallets which you can buy are LedgerNano S, KeepKey, Trezor, Jaxx, Mycelium and Electrum.
We hope that all your doubts regarding the HD wallets for cryptocurrencies are cleared. HD wallets solve the problem of backing up every time and protects your financial privacy.